You need to be pre-qualified to avail a real estate loan. When you apply for a loan the loan officer looks into your credit report, and also figures out the maximum loan amount that you can have, by working backward. This could also be done by you, and you can first start by establishing your monthly income. This is not an easy task, for the lenders always take into account that incomes which they can document. In taking out a real estate loan, you would need to qualify as regards to your earnings and your earnings needs to be proven in order that they may be taken into account by the loan officer, who arrives at the loan amount. The loan amount would necessarily depend on the kind of earnings that you have.
Let us find out how the officer would calculate your earnings under different circumstances.
In case you are employed and you receive salaries, and do not get to earn bonuses, the task becomes easy. All you need to do is to refer to your paycheck, and if you get paid every twice in a month, you would be multiplying the amount you get by two. Similarly, if you get paid every two weeks, you would multiply that by 26, considering that, in your case, there are 26 paydays in a year. You need to divide this by 12 in order to get your monthly earning figure. There are people who do not work all through the year, and the rules in their case would be different.
If you earn by hourly payment, and do not earn over-time, it becomes easy to calculate your monthly income. All you would need to do is to multiply your hourly pay by 40, being 40 hours of work per week, which gives you your weekly pay. This way you need to convert into a yearly figure and to do this you multiply that weekly figure by 52, there being 52 weeks in a year. After that, you divide that yearly figure by 12 in order to get your monthly pay amount.
All this is easy to calculate. But if you should be earning overtime, bonuses, or commissions, the matter gets to be complicated. In this case the lenders would not consider the earnings that you have from those sources. Instead they will average out that income that you had for the last two years, and add that amount to your regular income, be it hourly, weekly, or monthly. In order that you can quickly know your monthly income, you should get your W2 forms for the last two years, add up the amounts, and divide that by 24 in order to get your monthly income.
In similar fashion, if you are a teacher, a nurse, a seasonal worker in construction, or a worker earning from a part-time job, you can use the same way to calculate your near monthly income. You would need to add all your pay amounts for the last two years from your two year's W2 form, and divide that by 24. This will get you an approximate monthly income.
You would need a two-year track record if you are a self-employed person or receive 1099 income. The income shown in your IRS is taken to be the documented income that you have. It is quite usual that many of us over-state our expenses while we show our income in the IRS, and this real income may be understated. If you look at the schedule "C" of your tax return, there you will find an amount mentioned as "Profit". This amount is then your annual income, and calculating any depreciation on that value and adding the two sums together, and dividing that by 24, you get your near monthly income.
Just last week, a new client steadfastly refused to initiate his Temecula CA home search until he wrapped up his home financing approval process. When he asked my opinion on his plan, all I could respond with was "good man!". Given the chance, I wish every client I take on to get pre-approved. As an area specialist for Temecula and Murrieta CA Real Estate, I know that having home buyers get complete home loan approval before they start shopping is an absolute must to smart home shopping.
Here is why:
1. After your home loan is approved - it confirms you really can buy a home! 2. Following qualification you know what you can buy and your monthly mortgage amount. 3. Following approval, you stop stressing and concentrate strictly on home shopping. 4. With your approval, your real esate agent can use it to save you lots of money. 5. And now that you have your loan approved your transaction will be smoother.
I will take these 5 bullet-points in order. Because your loan is pre-qualified it means you actually can buy a Murrieta or Temecula home - that is good news! So many people want to purchase a home but never validate that they really can. Your loan pre-qualification lets you indulge in the enjoyment of locating real estate. It minimizes concern about what you can and can't do which will stress you out while you look. Purchasing a house should be one of the most fun things you ever do. Get your financing approved and simply relish the buying experience.
Now you're out looking at Temecula or Murrieta homes much more relaxed since you already know for a fact you are qualified and exactly what you can afford. You even know roughly what your monthly bill will be at certain price points. Now we get to the exciting part. Whenever you step into a home that resonates for you, you can relax in the knowledge that you can really buy it. Additionally, you protect yourself the negative of viewing properties that are outside the range you can buy. Too many people don't get pre-approved prior they go out and thereby look outside what they can buy.
Now with those steps off your plate, you should put your mind fully on finding the ideal Temecula, Murrieta, Menifee, or Wildomar home that meets your long terms goals. Too many people worry about the money part they overlook critical issues on the properties they look at. Big concerns like good schools, location, community, and quality of life are extremely important. When purchasing a home, you need all your brain power on the long term goal.
An additional benefit of securing your home loan qualification is the deal making strength it grants your salesperson when you decide to make an offer. Dedicated real estate agents use your approval to get you the best negotiated transaction. If you are bidding against other buyers for an incredible deal on a solid property, you have a much better chance of getting the home. With less downside because your are qualified, you can ask for all closings costs paid.
Very likely the biggest benefit in getting your pre-qualification is a much more fun home buying experience. This truly will make everything easier. Let's revisit out the reasons again. You will enjoy shopping for your new home much more. You will have attention to detail and make a smarter long term choice. You will also get a lower price. And, last but not least, the home buying process will go through quicker and be a lot more fun. A good Temecula real estate purchase starts with good decisions.
Both Amalorpava Mary & Stefan West are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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